Steel tariffs could have unknown consequences for Mississippi soybean farmers

Global stocks and the dollar slumped on Wednesday after a strong White House advocate for free trade resigned, fanning fears that President Donald Trump will proceed with protectionist tariffs and risk a trade war. David Pollard reports.
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Almost 2.2 million acres in Mississippi were harvested for soybeans in 2017. Of those acres, half of the crops were shipped overseas, said Keith Coble, professor and head of agricultural and economics at Mississippi State University.(Photo11: File photo/Getty Images)

President Donald Trump's decision to impose steep tariffs on steel imports could have unintended consequences on Mississippi soybean farmers.

China in particular has raised that specter of retaliation over the tarifs. It annually imports 30 million tons of soybeans from the U.S.

Soybeans are a billion dollar business in Mississippi and the third highest agricultural crop behind poultry and forestry, according to the Mississippi Department of Agriculture and Commerce. More than 110 million bushels were produced in the state in 2017 from 3,274 farms.

According to Trent Irby, a Mississippi soybean specialist, almost 2.2 million acres in Mississippi were harvested for soybeans in 2017.

Of those acres, half of the crops were shipped overseas, said Keith Coble, professor and head of agricultural and economics at Mississippi State University.

"We export almost half of every bushel of soybeans that we produce in the country," Coble said. "If you think about the Mississippi River, where a lot of those beans pass through, half the bushels are going through the river and to another part of the world."

The majority of the soybeans are shipped to China, the European Union, Japan, Mexico and Taiwan, he said.

While the impact of the proposed tariffs is still unknown, Coble said, other countries are likely to retaliate financially against the United States.

"Other countries, if they respond, will respond not necessarily in the same industry but where they think they could hurt the other country the most," he said.

For the United States, that very well could be soybeans.

"We're very, very concerned," said Patrick Delaney, policy communications director for the American Soybean Association. "We've heard directly from the Chinese that one of the areas they're looking to hit in retaliation are soybeans. We sell more soybeans to them than to the rest of the world combined so were very nervous."

China spent $14 billion in soy in the last marketing year, Delaney said, equating to 1.19 billion bushels. One in every three rows of soybeans grown in the U.S. are sent to China, he said.

"There's a lot at stake," Delaney said. "There are a lot of ways that that this action can come back and bite us. It's something that we're very concerned about."

Dan O'Bryan, risk management specialist for Top Third Ag Marketing in Chicago, said he's been getting calls from clients questioning what tariffs mean for their crops. O'Bryan, who specializes in hedging and risk management for producers, recently spoke to a group from Farm Bureau in Jackson.

"There is definitely some anxiety around the country with all agricultural producers and I would think other industries as well," he said. "The question is, is this posturing, is the art of the deal being displayed here?"

Referencing the 1980 grain embargo against the then Soviet Union, he said, "that was pretty damaging to U.S. farmers, and the long-term result of that is now Russia is one of the largest exports of wheat in the world."

It's not a matter of America being the only option for other countries when it comes to soybeans, Delaney said. While the U.S. is a large international producer of soybeans, so are Brazil and Argentina.

"This is something that we are all interconnected," he said. "If demand from a place like China is what sustains prices and creates a favorable economic climate in the United States, we've got to work to protect that. Trade demands a really light touch. It's not just a black and white issue. It's not a matter of someone is treating us unfairly and we've got to walk away from the table. It's not that simple."

Coble noted that "international trade is complicated" and, as a result of the steel tariffs, Americans may see impacts on goods that aren't remotely related to steel at all.

"Countries like to protect their own industries, and, when you do so, you protect that industry, but often times the cost is born by the consumers in your own country because you pay more for goods and services than you would have otherwise "

If the soybean market is impacted, it will impact farmers across the United States, he said.

"If there is some kind of an impact on the soybean market, it will affect our producers even if it was really beans from another state," he said. "The market for our agricultural commodities in the U.S. are so intimately tied to each other that, physically, it doesn't matter whether that soybean was from Nebraska or Mississippi. If the beans aren't going to this other county, it would impact the prices."

Delaney said the situation could be dire for Mississippi soybean farmers.

"They're not a good thing," Delaney said. "Trade decisions don't happen in a vacuum. You can't make one decision that benefits one industry and (think) it's not going to adversely impact another. We are the industry that's going to pay the price here."

Since 2013, rural farm incomes are down 50 percent and crop prices are down 40 percent in that same time period, Delaney said. So, in theory, he said, the people who helped carry Trump into the White House could be the ones most affected.

"Many of those communities who very much supported the president in 2016, they can't necessarily afford for that situation to get worse," Delaney said. "We've got a lot at stake."